The GDP growth rate may reach over 5 percent y/y in 2021, while inflation may approach 6 percent y/y at the end of this year. or even exceed it, said Eugeniusz Gatnar, member of the Monetary Policy Council (MPC), in an interview with ISBnews. In his opinion, the current level of inflation (5.5 percent y/y) is mainly driven by demand factors and the lack of reaction from the Council may preserve its high level.

“I have already said that coming out of the crisis caused by the pandemic, we have a very high deferred demand – estimated in Poland at PLN 100 billion. It is currently being implemented, hence the supply problems. Supply factors currently account for half of the inflation rate. Out of the current 5.5 percent of inflation, as much as 2.5 percent is the supply component and 3 percent is the demand component,” the MPC member said.

He assessed that the Polish Deal proposed by the government would be a kind of continuation of the expansive fiscal policy, and its effect would be an increase in the disposable income of the lowest earners, which could lead to an increase in demand and an increase in inflation.

In his opinion, the Polish economy recovered from the pandemic, which leaves room for a signal hike of 15 bp. In his opinion, waiting out a prolonged period of elevated inflation is risky.

"The second reason is that since the government is pursuing a loose, expansive fiscal policy to overcome the effects of the crisis, then we should use a policy-mix to tighten monetary policy," he pointed out.

(ISBnews1, ISBnews2)